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I'm Paula Jarzabkowski; I'm a Professor of Strategy at City University. I've been studying
reinsurance markets which are really important financial markets, because when the 'big ***'
happens - the hurricane Sandys, the big tsunamis that we've seen - that's the market that pays
out on all the insurance policies around the world.
The best way of thinking about it is that it's a laying-off service for heavy bets.
A ***, if he gets too many bets on a horse, has to lay off the bets with other people.
If you are an insurance company in a place that either is very prone to windstorms or
earthquakes or something, you will need to lay off the risk of having a very severe problem.
And the reinsurance industry is a method for insurance companies of spreading the risk.
So what we're doing as ethnographers is to really understand how judgement informs risk.
Probably the average return always used to be ten across the cycle.
One of the things about reinsurance judgement is that individual underwriters become very
skilled in knowing a territory and exactly the way that a risk may perform in that territory.
As we began to discuss with the buyers, the insurers themselves - particularly the big
global buyers, what they wanted - we found that they were changing the way they buy risk.
So instead of buying local specific risks to a territory, they were bundling risks and
buying global risks. Once you bundle risk, no individual can make those kinds of judgements.
We think that's very dangerous, we can show how important the judgement is, on an everyday
basis. The reinsurance industry has undergone quite
a bit of change because of the way in which the capital markets have developed in the
world, and I have a feeling that Paula was able to hold up a very interesting mirror
and bring some academic rigour to analysing big trends.
We provided actually something like 58 tailored reports to firms, about what we saw in their
firm. Most of them wanted at least a workshop on that just to the senior managers. After
that, some such as Hiscox and others asked us to come back and do a further workshop
with them. She would embed herself for various periods
into our teams, both here in London and in Bermuda, and she was 'fly on the wall' - studying
what went on. Then she would come and feed back some of the things she had learnt in
order to try and get comments from us about whether we felt that they were true or not
true; to validate things.And then we could all go to feedback sessions where she would
give aggregated feedback of what she'd discovered within the industry which led up to her final
report. This research has been a moving feast; we
ended up doing three projects for the industry. In the first one we really just looked at
the operational processes and how they can improve business relationships, improve the
efficiency of their processes, and also more effectively apply the different types of judgements:
the technical judgement and the more personal or tacit understanding type judgement appropriately.
Then it really moved on more to industry dynamics as we became more global and we began to show
them things like -- you know -- if you move into different spaces, you might need new
skills because you're writing different kinds of risks.
I was attracted myself by her work and, in fact, so attracted that we commissioned some
additional work on the side thinking that we would be able to steal a march on our competitors,
and I was amused to read in Paula's submission for the prize, that in fact we were not alone
in doing that, in fact around half of the people had done that as well.
Ethnography lets you see the little pieces that go into judgement. The great thing about
being an academic is you can do this type of very close research with business, but
you're impartial. My findings don't belong to anyone except the scientific community.
The really surprising thing for me is that an academic has managed to change people's
thinking in an industry. The real test is, well, do you change the way in which you do
your business? And we have changed the way in which we do our business thanks to it.
We have restructured our organisation and I think we will do further things, and certainly
to find that the respect of an alpha male industry has been earned by this feisty Australian
is quite a compliment for her. What we've found about reinsurance is so critical
because reinsurance underpins insurance; if we didn't have insurance much of our economy
would collapse. We've shown what is involved in quality risk-taking so it helps improve
the quality of their business portfolios, their survival, their ability to be there
to pay for tomorrow.